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Despite their
exposure to
flooding, low
elevation urban
areas concentrate
a high density of
economic activity
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The misery that floods have been inflicting on UK
residents in recent weeks is part of a major global
problem: over the past 30 years, floods worldwide
have killed more than 500,000 people and
displaced over 650 million people. Research by
Adriana Kocornik-Mina, Guy Michaels,
Thomas McDermott and Ferdinand Rauch
investigates why so many cities are hit by floods
year after year.
Flooded
cities
xtreme rainfall during
December 2015 resulted in
widespread flooding across
northern England, Scotland
and Ireland. With the costs of this one
event potentially exceeding $2 billion, an
important policy question is why so many
people are hit by flooding, particularly in
locations that are repeatedly inundated.
The recent events in the British Isles
are just one example of a major global
problem. According to media reports
collated by the Dartmouth Flood
Observatory, between 1985 and 2014,
floods worldwide killed more than half a
million people, displaced over 650 million
people and caused damage in excess of
$500 billion (Brakenridge, 2016).
E
Other datasets tell of even farther
reaching impacts: according to the
International Disaster Database, in 2010
alone, 178 million people were affected by
floods and total losses exceeded $40
billion (Guha-Sapir et al, 2016). To these
direct costs we should add longer-term
costs of disruptions to schooling, increased
health risks and reduced incentives to
invest.
So it seems important to understand
why so much is lost to floods. One might
argue that the private risks of floods are
balanced by the private gains from living
in flood-prone areas. But in fact, flood
plains tend to be overpopulated because
the cost of building and maintaining flood
defences is often borne by governments
and not by private developers. This
problem of an inadvertent subsidy to build
on flood plains is made worse because the
costs of flood recovery are also borne by
governments and non-governmental
organisations. This situation creates
potential for misallocation of resources,
and forces society to answer difficult
distributional questions.
Our research examines how prevalent
it is for economic activity to concentrate in
flood-prone areas, and whether or not
cities adapt to major floods by relocating
economic activity to safer areas.
Large-scale urban floods
In our empirical analysis, we study the
impact of large-scale urban floods. We use
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Figure 1:
Locations of cities affected by large flood events, 2003-08
n Three times
n Twice
n Once
n Never
Notes: City sizes are inflated to make them visible on a map of the entire world. Smaller dots
correspond to cities not affected by any of the floods in our sample. The number of floods in the
legend refers to the number of years in 2003-08 during which each city was affected by a flood
that displaced a total of 100,000 people or more.
new data from spatially disaggregated
inundation maps of 53 large floods, which
took place between 2003 and 2008. Each
of these floods displaced at least 100,000
people and taken together, the floods
affected 1,868 cities in 40 countries,
mostly in the developing world. Figure 1
shows the locations of the large flood
events included in our analysis. We study
the local economic impact of the floods
using satellite images of night lights at an
annual frequency.
Our data show that the global
exposure of urban areas to large-scale
flooding is substantial, with low-lying
urban areas flooded much more
frequently. Globally, the average annual
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risk of a large flood hitting a city is about
1.3% for urban areas that are more than
10 metres above sea level, and 4.9% for
urban areas at lower elevation. In other
words, urban areas that are less than 10
metres above sea level face an average
annual risk of about one in 20 of being
hit by a large flood. Of course, this
average masks considerable variation
across locations.
Local flooding risk results from a
complex combination of local climate,
permeation and topography, among other
factors. Some urban areas – even some
located at low elevation – will flood rarely,
if ever. At the other extreme, some urban
areas flood repeatedly. In our sample,
Cities built in
flood-prone
areas are locking
in exposure to
flood risk for the
long term
CentrePiece Winter 2015/16
about 16% of the cities that are hit by
large floods are flooded in multiple years.
We also find that even though lowlying areas are more likely to be flooded,
they concentrate a higher density of
economic activity, as represented by night
light intensity. There is a disproportionate
concentration of economic activity in low
elevation areas even in areas that are
prone to extreme precipitation, where the
risk of large-scale flooding is highest.
Figure 2:
Inundation and night light intensity maps for
Hurricane Katrina, New Orleans.
Panel A
Local impact and responses
When we analyse the local economic
impact of large floods, we find that on
average they reduce a city’s economic
activity (as measured by night light
intensity) by between 2% and 8% in the
year of the flood. But recovery is relatively
quick: night lights typically recover fully
within a year of a major flood, even in the
hardest-hit low-lying areas.
Figure 2 illustrates this pattern of
recovery in the aftermath of Hurricane
Katrina, which hit the city of New Orleans
in 2005. But it is worth noting that New
Orleans is unusual in our sample as it is
much richer (and much better lit) than
most of the flooded cities.
Our finding that economic activity
recovers after floods even in low-lying
areas suggests that there is no significant
adaptation, at least in the sense of a
relocation of economic activity away from
the most vulnerable locations. With
economic activity fully restored in
vulnerable locations, the scene is sadly set
for the next round of flooding.
A possible motivation for restoring
vulnerable locations is to take advantage
of the trading opportunities – and amenity
value – offered by water-side locations.
But we find that economic activity is fully
restored even in low elevation locations
that do not enjoy the offsetting
advantages of being near a river or coast.
Our results are also robust to
restricting our sample to cities with at
least some areas more than 10 metres
above sea level. This means that there is
no movement to higher ground in the
aftermath of large floods even within cities
where such movement is possible.
One exception to our general finding
that cities do not adapt in response to
large floods is evident in the subset of
recently populated parts of cities (those
that had no night lights in 1992). We find
that in these recently populated urban
Panel B
Panel C
Panel D
Notes: Panel A shows a detail from one of the inundation maps associated with Hurricane
Katrina, concentrated on the area around New Orleans. The map displays in red and pink the
areas that were inundated during the flooding. Panels B, C and D show the average annual night
light intensity in 2004, 2005, 2006 respectively, for New Orleans. There is a notable dimming of
night lights across the city in 2005. In Panel D, a recovery of night light intensity is apparent.
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areas, flooded areas show a larger and
more persistent decline in night light
intensity, indicating some relocation of
economic activity in response to flooding.
This may be either because flood risk was
under-appreciated in these newer urban
locations or because these areas had
fewer past investments, so moving away
was less costly.
Future floods
Our findings are important for a number
of reasons. First, global warming and
especially rising sea levels are expected to
exacerbate the problem of flooding in
many of the world’s cities.
Second, there is a continuing trend
towards increased urbanisation around
the world, especially in poor regions.
As urbanisation progresses, it is important
to know whether cities adapt and how
their populations can avoid dangerous
areas. Our results suggest that flooding
poses a challenge for urban planning
because adaptation away from floodprone locations cannot be taken for
granted even in the aftermath of large
and devastating floods.
Third, floods disproportionately affect
poor countries. Given the scale of human
devastation and its potential damage to
human capital formation (for example,
disruptions to education or harm to
people’s health), this is an important
development issue. To illustrate, planning
and zoning laws and their enforcement
are typically weak in developing countries.
Consequently, slums and other informal
urban settlements tend to develop on
cheap land with poor infrastructure,
including flood-prone areas.
More than 860 million people live in
flood-prone urban locations worldwide,
and this population increased by about six
million a year between 2000 and 2010.
Our finding that low elevation locations
concentrate much of the economic activity
even in poor urban areas with erratic
weather patterns highlights the tragedy of
the recurring crisis imposed by flooding.
Fourth, recovery assistance after
flooding is an important part of
international aid. Our findings suggest
that in some circumstances, part of the aid
and reconstruction efforts should be
targeted at moving economic activity away
from the most flood-prone areas to
mitigate the risk of recurrent humanitarian
disasters.
Finally, our results are relevant for
discussions of the costly effects of ‘path
dependence’ (Bleakly and Lin, 2012;
Michaels and Rauch, 2013). Our findings
suggest that parts of cities that are built in
flood-prone areas may be locking in
exposure to flood risk for a long time,
even when circumstances and the global
climate change.
This article summarises ‘Flooded Cities’
by Adriana Kocornik-Mina, Guy Michaels,
Thomas McDermott and Ferdinand Rauch,
CEP Discussion Paper No.1398
(http://cep.lse.ac.uk/pubs/download/
dp1398.pdf).
Adriana Kocornik-Mina is at AlterraWageningen UR in the Netherlands. Guy
Michaels is associate professor of economics
at LSE and a research associate in CEP’s
labour markets programme. Thomas
McDermott is at University College Cork.
Ferdinand Rauch of the University of
Oxford is a research associate in CEP’s
trade programme.
In the aftermath
of large floods,
economic activity
tends to return to
flood-prone areas
rather than
relocating to
higher ground
Further reading
Hoyt Bleakley and Jeffrey Lin (2012) ‘Portage
and Path Dependence’, Quarterly Journal
of Economics 127(2): 587-644.
G Robert Brakenridge (2016) ‘Global Active
Archive of Large Flood Events’, Dartmouth
Flood Observatory, University of Colorado
(http://floodobservatory.colorado.edu).
Debarati Guha-Sapir, Regina Below and
Philippe Hoyois (2016) ‘EM-DAT:
The International Disaster Database’,
Université Catholique de Louvain, Brussels
(http://www.emdat.be).
Guy Michaels and Ferdinand Rauch (2013)
‘Resetting the Urban Network: 117-2012’,
CEP Discussion Paper No. 1248
(http://cep.lse.ac.uk/pubs/download/
dp1248.pdf).
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